Watford became the first team into this season's FA Cup semi-final when substitute Andre Gray netted the winning goal two minutes after coming off the bench.
Gray's volley after 79 minutes settled a tense tie at Vicarage Road which saw Watford take a first-half lead through Etienne Capoue before Michy Batshuayi levelled for the visitors.
The result justified Watford manager Javi Gracia's decision to rest the majority of his players for their Premier League game at Manchester City last weekend, and proved sweet revenge for losing an FA Cup semi-final to Palace in 2016.
While Gracia made eight changes from the defeat at City, Palace were rocked by the absence of star man Wilfried Zaha with a calf injury.
Watford's 38-year-old Heurelho Gomes was the first goalkeeper in action with a diving save to deny Luka Milivojevic but it was his opposite number Vicente Guiata who struggled with the swirling wind.
Guiata twice made excellent saves from Gerard Deulofeu in open play but constantly flapped at set pieces, with devastating consequences after 27 minutes.
The Spaniard came out to claim a Jose Holebas corner but was in trouble once the ball sailed over his head. Craig Cathcart neatly put the ball back into the danger zone and Capoue neatly slotted in with his right foot.
Watford were still deservedly ahead by half-time but suffered set back just before the interval when Holebas injured his tackle in a challenge on Andros Townsend.
The Greek left-back didn't reappear for the second half and Townsend switched to the right wing to try and capitalise.
Palace started the second half with new vigour and after Batshuayi had hit the stanchion with a sighter, he levelled after 61 minutes.
Given the conditions, Gomes may regret trying to build out from the back rather than punting it long into the opposition half. The Watford defenders never seemed in control and after Adrian Mariappa dawdled, Batshuayi robbed him and advanced into the penalty area before a clinical finish into the right-hand corner.
It was the Belgian's third goal in seven games for Palace since a loan move from Chelsea on deadline day in January.
Watford, earlier had a penalty claim turned down when James McArthur appeared to block off Will Hughes at a free-kick, tried to shake themselves out of a temporary stupor when Abdoulaye Doucoure shot over from close range.
Gracia sent on Gray after 77 minutes and whatever he whispered to the striker worked a treat. Roberto Pererya finally escaped the attentions of Palace right-back Aaron Wan-Bissaka and when he completed a driving run by dinking into the area, Gray stretched out his left boot to volley past Guiata.
Deeney and Cathcart had chances to extend Watford's lead in the closing stages but one goal proved enough with Wan-Bissaka shooting wide for Palace in injury-time.
Watford's most famous fan and former owner Sir Elton John famously cried during Abide with Me when his club reached the FA Cup Final in 1984. This time it was Gomes in tears at the final whistle on what may be his final appearance at Vicarage Road.
